Gold Targets Highest Finish In Over A Week As Treasury Yields Tumble After Debt-Ceiling Agreement

Gold prices experienced an ascent on Wednesday, marking the final trading session in May. The decline in Treasury yields contributed to an increase in prices, positioning the yellow metal for its highest finish in over a week.

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In terms of price action, gold futures for August delivery rose by $8.90, or 0.5%, to reach $1,986 per ounce on Comex. The most-active contract, on track for its highest finish since May 23, narrowed its monthly loss to around 1.6%, as per FactSet data.

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Silver futures for July delivery advanced by 15.6 cents, or 0.7%, to $23.395 per ounce, though they recorded a monthly decline of over 7% following two consecutive monthly gains. Palladium futures for September fell by $35.50, or 2.5%, to $1,362 per ounce, while platinum for July delivery declined by $19.20, or 1.9%, to $1,002.70 per ounce. Copper for July delivery fell by 2.8 cents, or 0.8%, to $3.635 per pound.

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Gold prices had experienced three consecutive weeks of decline until Friday, partially reversing the rally that had driven the yellow metal's prices up by over $400 since the October lows. However, falling Treasury yields have provided support to gold prices this week, with yields decreasing in the aftermath of a deal between President Joe Biden and House Speaker Kevin McCarthy to raise the U.S. debt ceiling.

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Jim Wyckoff, senior analyst at Kitco.com, noted that the decline in U.S. Treasury yields this week has worked in favor of the gold and silver market bulls.

While the yield on the 10-year note decreased by 3.7 basis points to 3.664%, the ICE U.S. Dollar Index, a measure of the dollar's strength against major currencies, increased by 0.4% to 104.59, reaching its highest levels since March.

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With the debt-ceiling deal progressing and attention shifting back to the Federal Reserve, the consensus among policymakers and the market is for another rate hike in June. However, Adrian Ash, director of research at BullionVault, highlighted that gold prices remain high by historical standards, supported by Asian consumer demand and ongoing central-bank gold purchases.

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Despite temporarily losing the $2,000 level, the underlying price of gold remains robust. Ash emphasized that the absence of heavy investment demand suggests there is significant potential for gold to surge when financial markets face challenges, whether driven by concerns over the substantial and growing public debt in the United States or other factors.

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